Urals Energy (LSE:UEN) crashed by more than a third to 48p today after revealing that an unauthorised $1.5m loan made by one of its directors has thrown it into financial dire straits.
The Russia-focused E&P business said it believes the loan was made by Mr S Kononov, a director of the firm’s Petrosakh subsidiary, without board knowledge or approval. Kononov, whose family owns a 44pc stake in Urals, is alleged to have made the loan to allow a third party to purchase an additional share interest in the group’s Kholmst Port.
Urals acquired a 23pc voting interest in the Kholmsk commercial seaport in August and elected five representatives to its board the following month. The firm also believes that Kononov has made an unapproved disposal of part of its original shareholding in the port to a third party on deferred payment terms.
Urals said it is now pursuing the repayment of the loan as soon as possible and is investigating any related breaches of law and regulation, with further announcements expected in due course. In the meantime, it said its working capital position will be ‘significantly constrained’, and a previously announced dividend payment will not be payable, until it has recovered the value of the loan, adding:
‘The board have sought to initiate discussions with Mr Kononov regarding the repayment of the Loan, but at this time there can be no certainty that the Loan will be repaid in the near future.’
Urals added that the proceeds from a planned tanker shipment from Arcticneft in November will now be of critical importance to its short to medium-term working capital position. Finally, the company said that if the loan is not repaid and it has not secured alternative financing by the end of the month, then it will have to take steps to protect the interests of its creditors.